Take-or-pay Contracts and Throughput Agreements

  • Ron Paterson


Take-or-pay contracts and throughput agreements are unconditional commitments to buy goods or services from a supplier in the future, generally from a new facility created by the supplier. From the supplier’s point of view, such contracts guarantee a certain level of sales which gives assurance that the facility will be viable and expedite the financing; from the purchaser’s point of view, it secures a medium or long term source of supply, probably at favourable prices. Sometimes the supplier is set up by a consortium of customers who wish to share a particular facility, such as a pipeline to service the needs of a number of oil companies. Under these contracts, the purchaser is obliged to pay a certain minimum amount even if, in the event, it does not take delivery of the goods or use the services it has contracted for.


Cash Flow Balance Sheet Financing Arrangement Conference Centre Contractual Commitment 
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  1. 1.
    Discussion Draft of Statement of Principles Chapter 4, The recognition of items in financial statements, para. 34.Google Scholar
  2. 2.
    SSAP 21, para. 14.Google Scholar
  3. 3.
    CA85, Sch4, para. 50(5).Google Scholar
  4. 4.
    SFAS 47, Disclosure of Long-Term Obligations, FASB, March 1981, para. 23(a).Google Scholar
  5. 5.
    Ibid., para. 6.Google Scholar

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© Ron Paterson 1993

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  • Ron Paterson

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